The ARCs brought over ₹16,168 crore in loans in the hope that there would be demand for thermal power companies, giving them a huge upside, while lenders have exited due to over a four-year delay in its debt resolution.
In the latest deal, Prudent ARC acquired ₹156 crore of debt from Punjab & Sind Bank (PSB) at an unchallenged Swiss auction in an all-cash deal of ₹125 crore, said people with knowledge of the matter. This equated to an 80% recovery for the lender.
In February, PSB was planning to sell the same debt for ₹95 crore, equating to 57% recovery. It did not proceed with the auction and decided to fix the reserve price in context to the rising cash accumulated by KSK Mahanadi Power, people cited above said.
The company has around ₹8,500 crore in cash, which it earned in the last four years from power generation. It has three 600 MW operating units at Chhattisgarh and three other 600 MW units are under construction.
Prudent ARC already has ₹914 crore admitted claims in KSK Mahanadi Power following acquisition of debt from banks and other ARCs, shows data disclosed on the company’s website. Senior officials at Prudent ARC declined to comment.Among ARCs, Aditya Birla ARC has largest share of 33.38% in claims from KSK Mahanadi Power, followed by ASREC (India) Ltd which has 11.98% debt share and Prudent Arc with 3.82% debt following the latest deal, show disclosures by PwC-backed resolution professional Sumit Binani.
Among others, Kotak Mahindra Bank Phoenix ARC has 2.92% while Rare ARC and Asset Reconstruction Company of India (Arcil) have 2.10% and 0.98%, respectively.
The ARCs acquired loans from some of the largest lenders including the State Bank of India, Bank of Baroda, Punjab National, Axis Bank, and Life Insurance Corporation – who often have a significant say in the debt resolution of companies undergoing debt resolution. The 55% debt held by the ARCs also implies that these six ARCs will have voting rights to that extent and will also have a veto over any proposal that is put for vote.
As per the Insolvency and Bankruptcy Code (IBC), to pass any resolution, at least 66% of lenders must vote in favour. Conversely, if less than 34% oppose the resolution, the proposal is rejected.
KSK Mahanadi Power has two ancillary companies-KSK Mahanadi Water, which operates a water pipeline to the power plant, and Raigarh Champa Rail, which carries raw material to the plant-that are undergoing insolvency proceedings separately.
The resolution of the thermal power company has not proceeded after the National Company Law Tribunal (NCLT) stayed the sale process in June 2022 following a plea from a lender to consolidate the resolution of KSK Mahanadi Power and two of its ancillary companies.
